If you’re completing your own tax return this year, the deadline for self-lodgement is October 31. It’s common for property investors to self-assess or estimate costs based on their own judgement when completing a self-lodge tax return. However, investors who do so are potentially missing out on significant depreciation deductions by incorrectly evaluating their claims.
With just under a month to go, here’s everything you need to know about the October 31 deadline and your tax entitlements.
What is the October 31 deadline?
The October 31 deadline is only applicable for self-lodge tax returns. The financial year ends on June 30, so this gives you roughly four months to complete and lodge your own tax return.
What happens if investors miss the deadline?
If you expect to receive a tax refund, you won’t be penalised for lodging your tax return late. Even after October 31, you’ll still be able to self-lodge your tax return via the MyTax website. However, if you owe the tax office money and miss the deadline, you’ll be fined $280 for every 28 days that your tax return is overdue. Even if the deadline has passed, it’s important for property investors to lodge as soon as possible.
Depreciation deductions and self-lodge tax returns
Depreciation is one of the most lucrative tax deductions because it’s a non-cash deduction, meaning investors don’t have to spend money to be eligible to claim it. The Australian Taxation Office (ATO) allows owners of any income-producing properties to claim depreciation for the building’s structure via capital works deductions and for the plant and equipment assets contained within the property. These deductions reduce taxable income for property investors.
Many property investors choose not to seek expert advice and self-assess deductions, putting themselves at risk of using the wrong depreciation rates and classifying items incorrectly. As a result, investors could be missing out on thousands of dollars’ worth of deductions.
In residential properties, capital works deductions must be depreciated at a rate of 2.5 per year for a maximum of forty years, while eligible plant and equipment assets must be depreciated over time using an effective life supplied by the ATO.
Quantity Surveyors are recognised under Tax Ruling 97/25 as one of the few professionals with the expert knowledge necessary for estimating construction costs for the purposes of calculating property depreciation. A Quantity Surveyor can assess a property and provide a comprehensive depreciation schedule which outlines depreciation deductions accurately. A tax depreciation schedule can also be used as evidence should the ATO complete an audit of an investor’s claims.
Will a tax depreciation schedule increase an investor’s tax refund?
A tax depreciation schedule is the best way to ensure you get the biggest tax refund possible. There is no item too small to consider including in a schedule. Low-cost assets and low-value assets all add up to maximise depreciation benefits. If an asset has sufficiently low value, legislation allows it to be written off much faster or even claimed in full immediately.
A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property (forty years) to ensure you maximise your cash flow. In FY 2018-19, BMT found residential clients an average of almost $9,000 in first-year tax deductions. For clients with properties directly affected by the 2017 legislation changes, we still found an average of $5,641 in deductions per year.
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